Monthly Archives: July 2016

Death of the patriarch: Are we prepared?

“The sudden death of Henry Wong at 53, the acknowledged patriarch of the Cosmos Bottling family business, is a reminder that all of us–no matter how much we’ve accomplished and what we’ve built for ourselves–are mere mortals.”

WITH the death of the patriarch, is it the beginning of the end for the family business?

Visionaries and founders, second generation leaders, patriarchs or matriarchs always think of themselves as superheroes and take the inevitability of death lightly until one day, he or she discovers something that will forever change his or her perspective about life and living.

And then in the blink of an eye, the mortal faces death and reflects on the family and the family business and the “what ifs” and the “what should have been done”. But in all likelihood, it will be too late.

Thus, it is no surprise that the Chinese saying “Wealth shall not last three generations” will continue to consume and haunt families in the event that death suddenly occurs in the family.

Any death can disrupt a functioning family and can mercilessly cause the family business to jolt and veer off course. Worse, the lack of preparation and the entitlement of the family members can cause the family business to fall apart and disintegrate.

How then should family businesses deal with such a powerful emotional event? Allow me to continue with the third part of the Wong Family story with the hope that family members, especially those that are actively running the business, will finally take to heart the importance of preparing for a future event like the death of the patriarch or any family member.

The Cosmos Bottling story

It was a decision that Danny respected, knowing fully well that he was still “wet between the ears”. In short, Danny was barely a year in the business and, despite having an MBA under his belt, he still lacked the experience in leading a big organization. So the board chose an outsider in the person of William Ma Padua, an uncle and a professional rolled into one.

In the words of Danny, “Uncle William empowered the younger executives to make decisions and encouraged them to learn from their mistakes. He set the guidelines and we worked within the guidelines. The business grew and we continued with our expansion.”

But another unexpected crisis happened

After ten years of continued growth, William, in one of his visits to the US, suffered a mild heart attack and immediately decided to “call it quits”.

With the vacuum created by the untimely resignation of William and to avoid choosing one nephew over the other, the siblings of Danny’s father decided to let the number two brother, Hubert, who was the chairman at the time, assumed the presidency. Danny was again bypassed and refers to the decision of the uncles not only “unfair but clearly an emotional one.”

A test of character, credibility and competence

Danny went on to share his frustrations about Hubert. ”Can a person without a college degree, did not succeed in business, lacked human relations skills, stubborn, and who believed that he was always right but afraid to make important business decisions, run a family business made up of people from different families? My uncle was all of the above!”

The management was so demoralized, especially the family members working at Cosmos. Instead of solving relationship problems, Hubert would challenge family members who did not like the way he run things to quit or sell out if they can find a buyer, and that is what the other family members did.

With the squabbles happening almost regularly and the disputes continued with increasing acrimony, coupled with shouting accusations during board meetings, the situation reached a boiling point that prompted family members to entertain the idea of selling to outside parties.

So when offers came, the disgruntled members grabbed the opportunity and sold the majority shares of the company. In Danny’s own words, “Cosmos was sold for the wrong reasons and for the wrong price.”

The eventual transfer of ownership to Joey Concepcion of the RFM Group concluded the end of the Wong Family’s ownership of the Cosmos Bottling Company after three generations. The Cosmos family business died under the failed leadership of the second and third generation family members.

Cosmos would have celebrated their 98th year in business this year.

Now that Papa is dead, what should we do?

THIS is the second part of the article I wrote about the Wong family that owned Cosmos Bottling Corp. The brand was one of a handful of local beverage companies that was competing with Coke and Pepsi in the 70s and 80s. With Henry Wong’s effective leadership, Cosmos remained the only local brand left to fight the global giants.

In my previous article, the death of Danny’s father, Henry Wong, due to a malignant tumor was a major setback. It was so unexpected as Henry at the age of 53 was at the peak of his entrepreneurial career, having led the turnaround of Cosmos Bottling Corp.  from a state of stagnation to becoming a major player right after WWII.

Danny has a vivid recollection of that fateful day in 1970 and he narrates, “While attending the graduation of my other brother in the US, Papa suffered a stroke which was caused by a tumor in his brain. The stroke paralyzed half of Papa’s body. He was devastated! After the operation, the verdict was malignant. All the dreams of Papa went down the drain. I even asked myself these questions…Why him? He did not smoke! He did not drink! He ate healthy food! He played golf for his exercise! And why so unexpected?”

Six months to live

Danny continued with his story. “Papa was given only six months to live. But we were afraid to tell him for fear of making matters worse for him. We didn’t want to aggravate his state. And all the while he was hoping for a full recovery.”

It is painful and difficult for a family member to inform the patriarch about his debilitating condition, but by opting not to disclose his state of health, the family business would end up being compromised.

On the other hand, by disclosing to Henry, the family members could have worked their way toward the succession process and despite Henry being incapacitated, he would have given instructions to family members to prepare the leadership transition to the next generation.

Danny went on to share, “The day before Papa died, he could barely breathe. His second brother Hubert visited him in the hospital. Papa with a frail voice just told him, ‘Bahala na kayo’ (Please take care of things). The next morning, he was dead.

What next?

The stockholders, composed of Henry’s three brothers, a cousin, a nephew and Danny, met after the burial to decide who will succeed Henry as president.

Following Chinese tradition, the members of the immediate family would always have the preferential status over the secondary families. And Danny was next in line.

Inexperienced successor

Danny was barely a year in the business. After finishing his MBA in the US, he was requested by his father to return home to learn the intricacies of running the operations of the enterprise. Danny had the right qualifications except the experience, so expectedly, an outsider was chosen to lead the business.

Danny understood and respected the decision. In his own words, “Due to the inadequate experience on my part, and due to my relatively young age, the triad (uncles) had no choice but opted for an outsider to run the company. His name was William Ma Padua.

“Uncle William was actually a cousin of Papa who worked with him from the very start. He had the experience, was educated and a very devout Christian. And he empowered the younger executives to make the decisions and learn from their mistakes. He set the guidelines and we worked within the guidelines. The business grew and we continued with our expansion.”

But another unexpected crisis happened.

To be continued.

Never underestimate the vital role of the spouse

RUNNING a family business is hard, not just for the founder or senior generation leaders, but also on the whole family.

To quote Barry Moltz in an article he wrote for an online magazine All Business, “Running a business is like driving a car on a winding mountain road. While it may be tough for you, the passengers get car sick. This is especially true of your spouse, who is in the back seat turned around and blindfolded. If you can’t see where your business is going, they have no idea what’s going on!”

In my previous article related to satisfying the founder or senior generation leader expectations, it is important to reflect on the five ultimate challenges that every family owned enterprise must aspire to:

1. A healthy and stable business but ready to explore opportunities

2. A healthy and harmonious family, free from any major conflict

3. A family business that thrives on professionalism, excellence and meritocracy

4. A family business that will transition to a family inspired business run by professional leaders and finally

5. A family business that embraces governance and stewardship so it will continue from generation to generation

The vital role of the significant other

In a Forbes Magazine article about Entrepreneurial spouses, David Williams highlights one of the most critical roles but least acknowledged contribution of the spouse.

Williams went on to explain a myth that “being the spouse of an entrepreneur is highly desirable—that it’s great to be married to someone who loves their work and is taking creative risks. That ‘being your own boss’ leaves you with a greater income and higher flexibility to take time off for vacations or to attend to family needs.

In actuality, the opposite is far more typically true, the author added. The truth of the entrepreneurial life is a tornado of long hours, high risk and uncertainty.

Additionally, if an entrepreneurial company fails, it can often take the family’s finances down with it, which can lead to marital troubles or even trigger annulment.”

The spouse as the broker and peace maker

In the Asian context, the spouse plays a huge and crucial role in reigning in the family members as well as maintaining harmony within the family. Conflict is one of the biggest reasons for family members leaving the family business. And if the children are fighting with each other or goes into an argument or are are angry with their father, instinctively the mother often plays the part of a shock absorber, a listening ear and intervenes when needed. Spouses also broker or mediate and, more often than not, use their natural influence to prevent petty issues from escalating.

The cardinal expectations of the spouse 

For family members to be in the good graces of their mother or father, I have listed below the 10 rules to manage the expectations of the significant other.

1. He or she must experience financial security within the family.

2. He or she is offered the opportunity to contribute to the family business in whatever way he or she could willingly deliver.

3. The spouse gets appropriate rewards – compensation, benefits and recognition for working in the family business or by virtue of rights to ownership (for non-working spouses).

4. The spouse holds his or her own identity as a person and/or as someone at the professional level and not to be only known as the wife or the husband of the founder or senior generation leader.

5. He or she must receive relevant information concerning the family business and its effects to the family.

6. He or she must have the capacity to assert and decide over matters affecting the family in relation to the family business.

7. Spouses should be welcome at the family council and at all other family meetings.

8. Family members must understand the spouse’s reluctance to let go of her role in business, especially after the death of the founder.

9. He or she must be acknowledged as someone that can mediate conflicts and provide advice to family members.

10. The spouse is the beacon of light and must carry the power and influence long after the death of the founder or after a succession to the next generation.

Now that Papa is dead

IT is extremely important for my readers to reflect on the five insights shared by my colleague, Prof. Danny Barrenechea.

These powerful insights, when embraced by every family member, represents the collective aspirations of a family business.

Similarly, I am sharing these aspirations again as a reminder to family businesses embroiled in a dispute with both sides in a state of heightened acrimony, that there will never be a clear winner in a family conflict.

The aspirations of every family business

-A healthy and stable business but ready to explore opportunities

-A healthy and harmonious family, free from any major conflict

-A family business that thrives on professionalism, excellence and meritocracy

-A family business that will transition to a family inspired business run by professional leaders and finally

-A family business that embraces governance and stewardship so it will continue from generation to generation. When family members internalize these aspirations and reinforce it with governance and succession, then we have successfully played our role as family business advisors to the hilt.

In the words of Louis Farrakhan, an American political Leader, “United, we can solve our problem and divided, we have nothing”.

The Cosmos Soft Drinks story

Danny is no stranger to family business dynamics. He belonged to a family that started the pioneering Cosmos Soft Drinks brand in 1918 when his grandfather, Wong Ning, a native of Kwantong Province, migrated to the Philippines and established the Manila Aerated Water Factory along Misericordia St. in Manila.

When World War II broke out, the Japanese Army incarcerated Wong Ning because of his affiliation with the Kuomintang government. He later died in prison. Wong Ning left seven children.

After the Manila liberation

Danny’s father was Henry and being the eldest boy, by tradition, must naturally assume the responsibility of managing the family business.

Henry was well-educated, armed with a PhD, exhibited leadership skills, honest and fair. He also had the vision and foresight and his brothers and sisters obeyed and respected him. Soon, the Cosmos brand grew while the local players disappeared one by one. At its peak, it became a fight between Cosmos, a local player versus Coke and Pepsi.

While the business grew, Danny was already being groomed to succeed his father. After graduating Salutatorian from Xavier School in 1961, he was sent to the US to complete his college education.

He fondly relates during one of our exchanges, “My father got me into UCLA and after graduation, he sent me to the University of San Francisco for my MBA. My father followed a succession plan and he was sort of preparing me to help in the business since I was the eldest boy. He even assured me that if I do well, I will take over the top spot.

 An unexpected event

Danny recalls that fateful day in 1970. “While attending the graduation of my other brother in the US, papa suffered a stroke, which was caused by a tumor in his brain. The stroke paralyzed half of Papa’s body. He was devastated! After the operation, the verdict was malignant. All the dreams of Papa went down the drain.”

Papa is dead. Now what?

The stockholders, composed of Henry’s three brothers, a cousin, a nephew and Danny, met after the burial to decide who will succeed Henry as president.

Following Chinese tradition, the members of the immediately family would always have the preferential status over the secondary families. Danny was next in line.

With the death of Henry, will Danny, the eldest son, be the anointed successor?

To be continued.